Rate cut unlikely to halt Sterling rally

Marc Cogliatti, Currency Strategist at foreign exchange specialists HiFX comments on the news that the MPC have cut UK interest rates by 0.5% to 1.00%: "Today's decision by the Bank of England to cut interest rates was widely anticipated by the market and thus there was no negative impact on the UK currency. Sterling has now risen almost 12 per cent against the Euro since the beginning of the year and today's rate cut has not halted its progress. . The Pound is still looking oversold and undervalued so we anticipate that the current correction will continue further before it runs out of steam. Nevertheless, it is still too soon to call a base for Sterling and as yet, the longer term downward trend remains unbroken.

"For businesses importing goods from Europe, the recent Sterling rally will also offer some much needed respite given that companies have seen diminishing profit margins as a result of the falling Pound. It's been a similar story against the Dollar. Whilst the rally from the recent low has been slightly less dramatic (8.5%) it does give hope to firms importing from the US or countries where the local currency is linked to the Dollar."

"The rebound also offers good news for British holiday makers heading for Europe this winter who had been facing the prospect of getting less than 1 Euro for their Pound."